Axa cuts back on with-profits

AXA is to restrict new with-profits bond investments to 50pc in with-profits, and the rest in other funds, from May 17.

In a letter to independent financial advisers (IFAs), the insurer said: "We have reviewed the focus for our investment business for the remainder of 2002 with a view to increasing the proportion of unit-linked business we write."

Life companies often restrict with-profits business because it creates immediate liabilities. In January Royal & Sun Alliance stopped issuing new with-profits business, for example.

However it is unusual for an office as strongly reserved as Axa to make such an extreme restriction. Axa's with-profits fund is £9.5 billion; it has a free asset ratio - assets over and above liabilities - of 17pc, making it the third-strongest life office in the UK.

Clive Scott-Hopkins of IFA Towry Law said: "Axa is a strong office, so this is more worrying for with-profits. It looks as if the restriction of with-profits business is becoming a trend."